Won Pressured by Capital Outflows

The South Korean won weakened to around 1,470 per dollar on Monday, staying near its lowest level in over seven months amid persistent foreign equity outflows and firm corporate demand for US dollars.

Offshore investors recorded their largest monthly net selling on Korean shares in November, reversing two months of buying and reinforcing steady capital outflows from domestic markets.

Companies also accelerated their accumulation of dollar deposits, marking the fastest monthly increase this year as firms hedged against FX volatility and expanded overseas commitments.

On the economic front, sentiment softened following another month of manufacturing contraction, with the PMI stuck at 49.4 as output and new orders continued to retreat.

These dynamics limited support for the currency despite solid exports, which rose 8.4% in November.

The South Korean won appreciated to around 1,465 per dollar on Thursday, extending gains for the third consecutive session as investors digested the latest policy signal from the Bank of Korea.

The central bank maintained its benchmark interest rate at 2.5 percent, a decision regarded as supportive of currency stability amid gradually improving financial conditions.

The rate hold, its fourth in a row, reinforced confidence that policymakers are focused on maintaining stability while guiding the economy through its broader easing phase.

Adding to the positive sentiment, the Bank of Korea raised its economic growth forecast for South Korea to 1 percent for 2025, reflecting a recovery in domestic consumption and exports.

The revision marked an increase of 0.1 percentage point from the previous projection of 0.9 percent issued in August.

The South Korean won rose to around 1,464 per dollar on Wednesday, extending its gains for a second session as sentiment improved amid government efforts to stabilize the foreign exchange market.

Finance Minister Koo Yun-cheol highlighted that authorities are closely monitoring market activity, emphasizing that measures are ready if needed to ensure orderly conditions.

While no specific interventions were announced, his comments highlighted that all available options to support the currency are under review, helping to reassure investors and ease market concerns.

Adding to the positive sentiment, recent US economic data reinforced expectations of a 25 basis point Federal Reserve rate cut at the December meeting.

Remarks by key Fed members boosted confidence that a rate cut is likely, citing labor market softness as grounds for easing.

The South Korean won appreciated to around 1,471 per dollar on Tuesday, rebounding from multi-month lows as expectations of a Federal Reserve interest rate cut grew, with investors awaiting the latest US economic data for signals on upcoming policy decisions.

Domestic developments also bolstered sentiment, as the Bank of Korea prepares for Thursday’s rate-setting meeting.

Policymakers are expected to weigh financial-stability risks from rising apartment prices and strong third-quarter growth, including a 1.2% GDP increase, which may limit further monetary easing.

Adding to the positive outlook, the IMF maintained its 2025 growth forecast for South Korea at 0.9%, noting the economy entered a recovery phase in H2.

It expects stronger improvement in 2026, supported by recovering consumption, accommodative policies, and improved post-election consumer sentiment.

The South Korean won rose to around 1,471 per dollar, recovering slightly after touching its weakest level in over seven months amid signs that authorities would step in to support the currency.

Sentiment improved after South Korea’s financial chiefs signaled they are exploring measures to stabilize the currency.

Officials highlighted the sustained drag from large outbound allocations by the National Pension Service and from exporters holding on to dollar proceeds, noting these factors will be considered in any stabilization efforts.

Additionally, strong early-November export figures, supported by robust semiconductor and auto shipments, helped provide a floor for the currency, limiting further depreciation.

Meanwhile, expectations of continued demand for US assets, with Korean retail investors pouring funds into overseas equities and safe-haven gold products, have maintained structural dollar demand that has been weighing on the currency for months.

The South Korean Won touched 1475.00 against the USD, the lowest since April 2025.

Over the past 4 weeks, US Dollar South Korean Won gained 3.07%, and in the last 12 months, it increased 5.32%.